--- title: How Many Properties Can I Identify In A 1031 Exchange? description: Identifying the right number of properties during a 1031 exchange while also hitting your deadlines will help you have a successful 1031 exchange process. image: https://www.realized1031.com/hubfs/Images/photo/abstract/houses-on-coins-IS-1130124948.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # How Many Properties Can I Identify In A 1031 Exchange? Posted Jul 24, 2023 ![How Many Properties Can I Identify In A 1031 Exchange?](https://www.realized1031.com/hubfs/Images/photo/abstract/houses-on-coins-IS-1130124948.jpg) Executing a 1031 exchange to defer capital gains taxes when buying and selling an investment property can be a helpful tool for taxpayers. If you sell investment real estate at a profit, you will owe capital gains taxes on any appreciation in the value. Paying those taxes can adversely impact your reinvestment by reducing the amount available. If you structure the sale and purchase using a [1031 exchange](https://www.realized1031.com/blog/what-financial-advisors-should-know-about-1031-exchanges), you can defer the payment of the capital gains taxes. ### What are the 1031 exchange rules regarding multiple properties? In a 1031 exchange, investors can identify up to three potential replacement properties–contrary to the common assumption of a one-to-one exchange. It's crucial to meet IRS-defined deadlines, including a 45-day window post-sale of your initial asset for property identification. A clear understanding of these steps ensures a seamless 1031 exchange, helping to defer capital gains tax and potentially enhance your investment strategy. ### Are there exceptions to the rule of three properties? Investors can choose to identify more than three potential replacement properties using the 200 percent or 95 percent rules. Keep in mind that the replacement property the investor acquires must at least equal the price of the relinquished property. You can definitely buy multiple properties in a 1031 exchange.  The 200 percent rule allows the investor to identify as many properties as they prefer, but the combined value of all identified assets can’t exceed 200 percent of the relinquished asset’s value. For example, if the relinquished property sells for $1 million, the potential replacements can equal a combined value of $2 million.  The 95 percent rule also allows the investor to identify an unlimited number of properties with no limit to the total value. However, the investor must purchase at least 95 percent of the value identified. If the investor identifies $2 million in value, no matter how many assets combine to reach that value, they must purchase 95 percent of the identified value, or $1.9 million.  ### What does identification mean? In reference to a 1031 exchange, “identification” is a formal process. The investor notifies the [Qualified Intermediary (QI) ](https://www.realized1031.com/blog/can-a-relative-be-a-1031-qualified-intermediary)of the properties identified for consideration. The investor must do this within 45 days of the original sale. The Qualified Intermediary also maintains the proceeds from the original sale, ensuring that the investor does not have access to the funds. The QI keeps track of the necessary paperwork and oversees the purchase of replacement properties.  The Qualified Intermediary cannot be the taxpayer, anyone related to them (except by marriage), or an agent, employee, or business associate.  While the identification process allows the inclusion of multiple properties for potential acquisition in the 1031 exchange, the method used will determine the number that the investor ultimately buys.  ### What happens when I sell the replacement property? Suppose the investor successfully completes a 1-31 exchange and later sells one or more of the replacement properties without executing an additional 1031 exchange. In that case, they will owe capital gains taxes on the sale, plus the taxes that they previously deferred. For example: Joe sells Property A using a 1031 exchange to buy Property B and Property C. He defers the $30,000 in capital gains due for the sale of Property A. Several years later, if Joe sells Property B or C without completing another qualified exchange, he will owe the taxes due on that sale plus the original $30,000 that he previously deferred. However, if Joe uses the 1031 exchange to defer the taxes for each transaction, he can [continue the deferral](https://www.realized1031.com/blog/can-you-1031-exchange-forever) of accumulated taxes. When Joe finally distributes assets to his heirs, they will not pay the taxes because they receive the property at the current fair market value.  This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. Costs associated with a 1031 transaction may impact investor's returns and may outweigh the tax benefits. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. Hypothetical examples shown are for illustrative purposes only. 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If you structure the sale and purchase using a 1031 exchange, you can defer the payment of the capital gains taxes. What are the 1031 exchange rules regarding multiple properties? In a 1031 exchange, investors can identify up to three potential replacement properties–contrary to the common assumption of a one-to-one exchange. It's crucial to meet IRS-defined deadlines, including a 45-day window post-sale of your initial asset for property identification. A clear understanding of these steps ensures a seamless 1031 exchange, helping to defer capital gains tax and potentially enhance your investment strategy. Are there exceptions to the rule of three properties? Investors can choose to identify more than three potential replacement properties using the 200 percent or 95 percent rules. Keep in mind that the replacement property the investor acquires must at least equal the price of the relinquished property. You can definitely buy multiple properties in a 1031 exchange. The 200 percent rule allows the investor to identify as many properties as they prefer, but the combined value of all identified assets can’t exceed 200 percent of the relinquished asset’s value. For example, if the relinquished property sells for $1 million, the potential replacements can equal a combined value of $2 million. The 95 percent rule also allows the investor to identify an unlimited number of properties with no limit to the total value. However, the investor must purchase at least 95 percent of the value identified. If the investor identifies $2 million in value, no matter how many assets combine to reach that value, they must purchase 95 percent of the identified value, or $1.9 million. What does identification mean? In reference to a 1031 exchange, “identification” is a formal process. The investor notifies the Qualified Intermediary (QI) of the properties identified for consideration. The investor must do this within 45 days of the original sale. The Qualified Intermediary also maintains the proceeds from the original sale, ensuring that the investor does not have access to the funds. The QI keeps track of the necessary paperwork and oversees the purchase of replacement properties. The Qualified Intermediary cannot be the taxpayer, anyone related to them (except by marriage), or an agent, employee, or business associate. While the identification process allows the inclusion of multiple properties for potential acquisition in the 1031 exchange, the method used will determine the number that the investor ultimately buys. What happens when I sell the replacement property? Suppose the investor successfully completes a 1-31 exchange and later sells one or more of the replacement properties without executing an additional 1031 exchange. In that case, they will owe capital gains taxes on the sale, plus the taxes that they previously deferred. For example: Joe sells Property A using a 1031 exchange to buy Property B and Property C. He defers the $30,000 in capital gains due for the sale of Property A. Several years later, if Joe sells Property B or C without completing another qualified exchange, he will owe the taxes due on that sale plus the original $30,000 that he previously deferred. However, if Joe uses the 1031 exchange to defer the taxes for each transaction, he can continue the deferral of accumulated taxes. When Joe finally distributes assets to his heirs, they will not pay the taxes because they receive the property at the current fair market value.", "articleSection" : [ "1031 Exchange" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2023-07-24T20:50:27+0000", "datePublished" : "2023-07-24T20:50:27+0000", "description" : "Identifying the right number of properties during a 1031 exchange while also hitting your deadlines will help you have a successful 1031 exchange process.", "headline" : "How Many Properties Can I Identify In A 1031 Exchange?", "image" : { "@type" : "ImageObject", "height" : 325, "url" : "https://cdn2.hubspot.net/hubfs/733513/Images/photo/abstract/houses-on-coins-IS-1130124948.jpg", "width" : 649 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/how-many-properties-can-i-identify-in-a-1031-exchange", "name" : "How Many Properties Can I Identify In A 1031 Exchange?", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://cdn2.hubspot.net/hubfs/733513/Images/photo/abstract/houses-on-coins-IS-1130124948.jpg" } ```